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POSCO’s takeover bid for Senex could be Australia’s largest upstream takeover since 2018

South Korean conglomerate POSCO has made a surprise move on Australian gas producer Senex Energy making its first foray into the country’s upstream industry.

Wood Mackenzie analyst Michael Song said: “Senex’s portfolio is focused on producing gas from Queensland’s Surat Basin, where it is expecting a rapid growth in output and revenue as production ramps up from its Roma North and Atlas gas projects.

“An acquisition of Senex provides POSCO with exposure to Australia’s east coast gas market at an opportune time. The Australian east coast supply demand outlook is precariously balanced, and a lack of new supply sources is expected to lead to rising prices.”

Research director Angus Rodger said: “POSCO’s existing portfolio is heavily weighted towards Myanmar and the producing Shwe gas field. However, the company has come under considerable pressure following the country’s military coup and has already halted other business interests in the country.

“This move by POSCO highlights several key trends in the upstream space. Firstly, the growing role of ‘other’ buyer types in the upstream M&A space, particularly conglomerates, traders, miners and utilities. Secondly, the attractiveness of gas, particularly in supply-constrained areas such as Eastern Australia. And lastly, the importance of a large, diversified portfolio to increase resilience and manage a growing range of industry risks.”

Song added: “M&A activity in Australia’s upstream space has heated up in 2021 following the mega-mergers of Woodside and BHP Petroleum, and Santos and Oil Search. Although smaller in scale, if POSCO’s move is successful it will be the largest corporate takeover in the Australian upstream sector since 2018, when Santos acquired Quadrant Energy for US$2.1 billion.”

A tense few weeks will follow as Senex waits to see if any other potential bidders emerge from the woodwork to push the price up.

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